Consider the case of Daniel, a Brazilian software engineer who relocates to the United States for work and becomes a U.S. tax resident under the substantial presence test. Although Daniel now lives in Washington, D.C., he continues to maintain a checking account in São Paulo, a private pension plan, and a minority interest in a Ltda owned by his family. Once he becomes a U.S. tax resident, all these foreign assets—regardless of where they are located—must be disclosed to the IRS through the appropriate international reporting forms.
This scenario is increasingly common among global professionals who settle in the United States. Understanding which types of foreign accounts must be reported is essential for proper tax planning and international asset management.
Foreign Bank Accounts
Foreign checking, savings, time deposits, and joint accounts with family members must be reported if the combined value exceeds the applicable thresholds.
Relevant forms:
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- FBAR (FinCEN Form 114)
- Form 8938 (FATCA)
Foreign Investment or Brokerage Accounts
Accounts held with foreign financial institutions that contain stocks, bonds, mutual funds, ETFs, and similar instruments.
Relevant form:
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- Form 8938
Foreign Retirement and Pension Accounts
These include Afores (Mexico), AFPs (Chile), RRSP/TFSA (Canada), Superannuation (Australia), and similar plans. Even if subject to treaty benefits, they are considered foreign financial assets.
Relevant form:
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- Form 8938
Foreign Life Insurance and Annuity Contracts
Policies with cash value or withdrawal options, issued by a non-U.S. insurer, qualify as reportable foreign financial assets.
Relevant form:
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- Form 8938
Ownership in Foreign Corporations or Entities
Interests in foreign companies, regardless of income distribution, must be reported. Examples include:
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- Mexico: S.A. de C.V., S. de R.L.
- Colombia: S.A.S.
- Brazil: Ltda, S.A.
- Japan: K.K., G.K.
- UK: Ltd
Relevant forms:
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- Form 5471 (foreign corporations)
- Form 5472 (related-party foreign-owned entities)
- Form 8865 (foreign partnerships)
- Form 8938 (additional FATCA disclosure)
Foreign Trusts, Foundations, and Similar Structures
Reportable for grantors, beneficiaries, or individuals with control over foreign fiduciary arrangements.
Relevant forms:
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- Form 3520 / 3520-A
- Form 8938
Foreign Financial Contracts and Derivatives
Options, swaps, and other financial instruments issued by foreign institutions.
Relevant form:
-
- Form 8938
Real Estate Held Through Foreign Entities
If foreign real estate is owned through a corporation or partnership, the reportable asset is the ownership in the entity, not the property itself.
Relevant forms:
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- Form 5471, 5472, or 8865
- Form 8938
Relevance for Taxpayers
Understanding which foreign accounts must be reported is essential for maintaining clarity over one’s global financial profile and ensuring accurate U.S. tax filings. Foreign nationals who become U.S. tax residents should carefully review their international assets and determine which reporting forms apply, particularly when assets are held through foreign entities or complex structures.
By identifying the correct categories of reportable accounts and using the appropriate international reporting forms, taxpayers can maintain full transparency in their cross-border financial activities.
We Can Help!
For individuals and businesses across the United States and worldwide who manage international assets, the guidance of an experienced international tax attorney is invaluable. Our team at JH Tax Law assists clients with sophisticated cross-border tax matters, including foreign asset reporting, international tax planning, foreign business structures, and international tax litigation.
Contact our office for a confidential consultation today!
